CANADA STOCKS-TSX plunges to 2-month low as Fed sends markets reeling

Reuters Staff

4 Min Read

* TSX falls 299.72 points, or 2.44 percent, to 11,968.57
* All 10 main index sectors decline
* Gold-mining shares drop 7.3 percent
* Bombardier down 2.2 percent after rival wins orders
By John Tilak
TORONTO, June 20 (Reuters) - Canada's main stock index
suffered its biggest one-day drop in more than two months on
Thursday after the U.S. Federal Reserve's nod toward exiting its
stimulus program hit global markets and triggered a massive
selloff in gold-mining shares.
The decline took the Toronto index to its lowest point in
more than two months.
Investors stared at a sea of red as every major index sector
ended in negative territory. Gold miners fell the hardest,
dropping 7.3 percent as bullion prices hit a 2-1/2-year low.
The market also reacted to data that showed Chinese factory
activity weakened to a nine-month low in June as demand
faltered, heightening the risk of a sharp second-quarter
slowdown.
U.S. Fed Chairman Ben Bernanke said on Wednesday the
economy is expanding strongly enough for the central bank to
begin slowing the pace of its bond-buying stimulus later this
year.
While markets have been roiled in recent weeks by fears that
the Fed will take its foot of the gas pedal, the U.S. central
bank's latest pronouncement sent global markets tumbling.
"Anytime there is a change in monetary policy, it gets
sloppy for a while," said Diana Avigdor, portfolio manager and
head of trading at Barometer Capital Management.
"After a robust correction, nothing's really changed except
for a confirmation that the economy might be going in the right
direction, but slowly."
The Toronto Stock Exchange's S&P/TSX composite index
closed down 299.72 points, or 2.44 percent, at
11,968.57.
"I don't think we're headed for a catastrophic global
recession, but investors need some time to assess this," said
Elvis Picardo, strategist and vice president of research at
Global Securities in Vancouver.
"We are in for a period of renewed volatility as investors
digest this news," he added. "But they need to look past what
Bernanke said and need to believe that the underlying message is
the U.S. economy is getting on a firm footing and that's why the
stimulus measures are coming off."
All of the 10 main sectors on the index were in the red
Financials, the index's most heavily weighted sector, were
down 1.7 percent. In the group, Royal Bank of Canada,
the country's biggest lender, fell 2.9 percent to C$58.92 and
played the biggest role of any single stock in leading the
market down. Bank of Nova Scotia dropped 2.7 percent to
C$55.41.
Energy shares gave back 2.3 percent, with lower oil prices
further weighing on sentiment. Suncor Energy Inc
was down 2.2 percent at C$30.83.
The materials sector, which includes mining stocks, lost 5.7
percent as gold miners retreated. Barrick Gold Corp
dropped 7.8 percent to C$17.10, and Goldcorp Inc fell 7.9
percent to C$24.81.
Rona Inc said it has struck a deal to sell its
plumbing, heating, ventilation and air conditioning business to
Emco Corp, and expects net proceeds of C$215 million. The home
improvement chain's stock fell 1.1 percent to C$10.13.
The market also reacted to signs at the Paris Airshow this
week that Bombardier's shift upmarket may be backfiring as its
arch-rival in the small passenger jet category, Embraer, piled
on orders for an upgraded plane and a new Japanese challenger
vowed to win business. Bombardier shares were down 2.2
percent at C$4.53.